Real Estate Crash thread

[GiBo]

I am pretty sure this has little to do with that and more to do with the Greenapan/Whitehouse plan to support and grow the economy through housing after the 2000 tech implosion. Laws were passed, rules were bent to allow brokerage firms to leverage out 30-1. All sorts of CMOs, etc were created that allowed said investment banks to pool poor (subprime loans) in with good loans (ya right) and sell them off to everyone from your pension fund to the governments of the World as everyone wanted just a little bit better yield than was available from say Treasuries without understanding what they were buying because the rating agencies said these were safe investments and they were insured by the likes of AIG, PMI, etc who have all crashed and burned as the truth has come out. This was a tremendous shit show that came about from greed. Greed for higher yields, greed to provide these very profitable pools to the markets, greed on the mortgage industry to earn fat commissions in generating the product for Wall Street to sell. Greed from the consumer to be offered loans they didn't qualify for so they could buy or strip equity from properties to support their housing ATM addiction. As other industries saw how great this was all working for Wall St and the housing industry, they decided to drop credit standards too and do the same pooling of shit with good and sell it off to the investment community. The auto, student loan, commercial R.E., you fucking name it all did the same shit. The so called sub prime housing issue is but a fall boy for the entirely corrupted system of giving out any type of loan with poor credit standards behind it.
Like any ponzi scheme, it had to blow up at some point. One by one all of the shit done over the last 7 years will fail and as that happens, industries and individuals will be crushed.
The government can say they are going to bail out everything and it will slow the speed of the eventual correction, but not stop it. This is the worst credit implosion/liquidity problem to happen since the great depression and the average Joe is clueless of the massive financial typhoon bearing down on us all.
The world and markets will be a very different and poorer place in 2 years regardless of who is elected President.
Short the S&P, short the Case Schiller index, likely buy Gold.

Check this cartoon out:
http://docs.google.com/TeamPresent?d...uth=true&pli=1

[timvwcom]

They just wrapped up discussion in the House and started the voting, the Senate is scheduled to vote on Wednesday... let's assume this $700 billion Wall Street bail out/rescue passes and is signed into law, is it REALLY going to work by itself? How many other bail outs/rescues will follow? Will this activity of propping up the economy consume most of the next year? Will we be pouring more hundreds of billions into a hole in the ground behind this?

Even if this unfreezes the credit markets, specifically commercial paper, in the short term... what happens if the foreclosures don't slow? Assuming owners who can't afford their mortgage payments don't buy appliances and cars and such, where does the rest of economy go? If layoffs increase, and real estate market stays upside down for many, the foreclosures just escalate, right?

Here is one news piece from today on what the current plan might do for real estate/foreclosures;

Foreclosures are key element missing in plan
$700 billion bailout likely to offer little help for struggling homeowners

ANALYSIS
By John W. Schoen
Senior producer
MSNBC
updated 6:19 a.m. CT, Mon., Sept. 29, 2008

Hard as it is to believe, even a $700 billion bailout may not be enough to dig the economy and financial markets out of the hole they're in.

By committing such a staggering sum to end the widening financial crisis, Congress and the White House are hoping to deliver a swift knockout punch to the fear gripping the global markets and economy. But to win bipartisan support, key provisions have been watered down or left vague — including any efforts to stop the wave of foreclosures at the heart of the meltdown.

...

The hope is that after the government jump-starts the market with massive purchases of the riskiest paper, private investors will follow, unfreezing trillions of dollars in capital that has fled to safety until the full scope of the crisis can be determined.

...

But the biggest unknown is whether the government’s pledge to help homeowners at risk of losing their homes will be any more effective than past efforts to slow the pace of defaults and foreclosures. Until that tide begins to turn, the housing market will continue to be bloated with big inventories of bank-owned houses put back on the market at fire-sale prices. That puts downward pressure on all home prices. And until home prices stabilize, it’s impossible to assign a value to the troubled investments at the heart of Wall Street's problems.

...

For the past year, many House Democrats have been urging that the process of rewriting unsustainable loans be turned over to bankruptcy judges. That proposal was hotly debated again during the whirlwind negotiations of the past week.

Opponents — including The White House and some Republicans — argued that forcing lenders and investors to accept such bankruptcy “cramdowns” would only make matters worse. They argue that lenders would be leery of extending new credit if borrowers could go to court to have terms changed. That would make mortgages more costly and more difficult to get, worsening the housing crisis, say opponents.

Supporters of the bankruptcy law change argue that voluntary efforts to work out affordable loan terms — including the White House’s highly touted Hope Now Alliance — just haven’t worked. They also note that the bankruptcy process applies to other forms of debt that are still in relatively good supply.

In any case, unless anticipated future loan “resets” to unaffordable payments can be diffused, the pace of mortgage defaults and home foreclosures likely will be difficult to contain.

[MashedPotatoes]

phase 1 - pass bailout
phase 2 - ?
phase 3 - profit!

[rideit]

Talked to a friend yesterday who made 3.6 mil. last year on some properties in Teton Valley.
Last October, he sold a lot for $289,000. The lot next to it, pretty much identical in characterviewshed/land qualities etc, just closed yesterday for $108,000.
He is belly up (but currently land rich)

I am re-hanging my license this fall, it's time for you bargain hunters to call me.
Seriously.
If you want property here, I am predicting that this winter will be the time to buy.

[grrrr]

Prices are falling faster than ever around here. Pretty soon there will be some real bargains.

Unfortunately, I am un-loanable.

[Benny Profane]

Talked to a friend yesterday who made 3.6 mil. last year on some properties in Teton Valley.
Last October, he sold a lot for $289,000. The lot next to it, pretty much identical in characterviewshed/land qualities etc, just closed yesterday for $108,000.
He is belly up (but currently land rich)

I am re-hanging my license this fall, it's time for you bargain hunters to call me.
Seriously.
If you want property here, I am predicting that this winter will be the time to buy.

Sorry, dude. If anything happens, it won't be on your side of the pass. For some time. Ultra rich properties will maybe survive over on the other side.

[gravitylover]

Short the S&P, short the Case Schiller index, likely buy Gold.

You're consistent if nothing else. This is over a week now you're on the buy gold kick. I'm in

Nice analysis there too.

[liv2ski]

You're consistent if nothing else. This is over a week now you're on the buy gold kick. I'm in

Nice analysis there too.

I have had some gold mutual funds for a year now. Let me tell you they can have some big swings, so maybe appropriate for 10%-20% of your capital. In a year, I hope they have worked for you. Just remember, if it loses 10% look at selling it. You can always buy it back after a pull back, as gold really moves a lot.

[Hugh Conway]

http://realestate.overstock.com/

[skier666]

Citibank just listed a bunch of their Bay Area bank properties to increase their capital holdings (they own the land that contains their branches) They are also doing lease-backs on said property. Credit is tight, and its all about cash deals. I know one business that got one.

[timvwcom]

Citibank just listed a bunch of their Bay Area bank properties to increase their capital holdings (they own the land that contains their branches) They are also doing lease-backs on said property. Credit is tight, and its all about cash deals. I know one business that got one.

How long of lease back term? Renewable at their or your option?

[Chook]

So are there any good resort areas with really cheap property these days? If I could pick up a really nice house in the US somewhere, I'd be looking to quit my job and become an illegal...

[skier666]

How long of lease back term? Renewable at their or your option?

Still waiting for the exact details....I was actually out of town when the deal went down. The property was in the right place, the right size, the right price, and can bulldoze the lone bank if need be. Its on a street full of high rent car dealerships, actually almost any car you can think of except for the Italian brands (ok, so some may hit some hard times), every anchor big-box store, mixed use housing developments, one of the highest sales-to-square foot malls in the country, close to major highways, etc etc etc....

[sfotex]

http://realestate.overstock.com/

Gotta love it....

[timvwcom]

Oh brother...

Home Prices Seem Far From Bottom

By VIKAS BAJAJ
Published: October 15, 2008

The American housing market, where the global economic crisis began, is far from hitting bottom.



Marc Serota for The New York Times

The number of empty homes is near a 52-year high. At left, a house in foreclosure in Deerfield Beach, Fla.; and at right, homes for sale in the Ladera Ranch neighborhood of Orange County, Calif.
Readers' Comments

Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession.

In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.

Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates — all of which will reduce the already diminished pool of would-be buyers.

“The No. 1 thing that drives housing values is incomes,” said Todd Sinai, an associate professor of real estate at the Wharton School at the University of Pennsylvania. “When incomes fall, demand for housing falls.”

Despite the government’s move to bolster the banking industry, home loan rates rose again on Tuesday, reflecting concern that the Treasury will borrow heavily to finance the rescue.

On Wednesday, the average rate for 30-year fixed rate mortgages was 6.75 percent, up from 6.06 percent last week. While banks are moving aggressively to sell foreclosed properties, the number of empty homes is hovering near its highest level in more than half a century.

As of June, 2.8 percent of homes previously occupied by an owner were vacant. Nearly 1 in 10 rentals was without a tenant. Both numbers are near their highest levels since 1956, the earliest year for which the Census Bureau has such data.

At the same time, the number of people who are losing jobs or seeing their incomes decline is rising. The unemployment rate has climbed to 6.1 percent, from 4.4 percent at the end of 2007, and wages for those who still have a job have barely kept up with inflation.

In New York and other cities that rely heavily on the financial sector, economists expect that job losses will increase and that pay heavily tied to year-end bonuses will decline significantly.

One reliable proxy of housing values — the ratio of home prices to rents — indicates that in many cities prices are still too high relative to historical norms.

In Miami, for instance, home prices are about 22 times annual rents, according to analysis by Moody’s Economy.com. The average figure for the last 20 years is just 15 times annual rents. The difference between those two numbers suggests that a home valued at $500,000 today might be worth only $341,000 based on the long-term relationship between prices and rents.

The price-to-rent ratio, which provides one measure of how much of a premium home buyers place on owning rather than renting, spiked across the country earlier this decade.

...

[Benny Profane]

Man, if you have some cash, Florida has to be the best place to invest right now. Lots of boomers moving down there over the next 20 years. Half off sale.

[Spats]

Half off sale.

And getting cheaper every day. Don't go catching falling knives.

Besides, what money are the boomers going to be buying their new condos with? Their retirement savings that's down 40% and falling?

[iceman]

And One Thousand Replies.

[liv2ski]

Looking in the local fish wrap today, I noticed many new listing are $999,950 Looks like we finally went through the $1M floor that had held for a shockingly long time IMO. Looks like those new listings are about 20-25% lower than 18 months ago.
Following the market in Mammoth CA, it looks like properties listed/priced to sell, are in the mid 2003 price range.
With it looking more and more certain that the overall economy will struggle through 2009 and likely into 2010 and the fact that my division is in jeopardy of being closed down, as part of the Wells Fargo acquisition of Wachovia, I guess jobless, I won't be buying in Mammoth soon anyways. Hopefully, I will have the confidence to buy up there this time in 2009 or 2010, as I really want to live there, for a number of years, down the road.

[Benny Profane]

And getting cheaper every day. Don't go catching falling knives.

Besides, what money are the boomers going to be buying their new condos with? Their retirement savings that's down 40% and falling?

You can still sell a home in Metro NYC and trade down to something nice in Florida. It's all relative.

[skier666]

And getting cheaper every day. Don't go catching falling knives.

Besides, what money are the boomers going to be buying their new condos with? Their retirement savings that's down 40% and falling?

That's why its good to have income-producing rental property in markets like the SF Bay Area...rents go up, well until the demand starts to level off.

[rideit]

Just got this e-mail from a prominent Jackson broker...
Howdy fellow Jackson Realtors,

It should come as no surprise that the current real estate market in our region has all but dried up. In the coming months we will see real estate offices closing and agents going inactive, as they were not prepared to handle a downturn.

We at Jackson Hole ********** would like to extend a personal invitation to interview for a sales position in either our Alpine or Jackson offices. We are looking for career-minded agents and have listed just some of the many tools available when you become part of our team.

Please review and feel free to call with any questions or to set up an interview.

Sincerely,

[gravitylover]

You can still sell a home in Metro NY

You think so?

Well maybe for half of what I could've sold for this time last year and instead of 30 days on the market it's more like 6-12 months.

[Stu Gotz]

You think so?

Well maybe for half of what I could've sold for this time last year and instead of 30 days on the market it's more like 6-12 months.

My wife and I are looking (lukewarmly) for a house and we just got a listing from a broker that is well outside of the range of what we had been seeing. The first time I have seen a cracking in the "it won't happen here" region. We had been seeing a lot of 5-7% discounts, but this was 25% below other comparable houses.

[Benny Profane]

Hedge funds are liquidating right now. Give it another 6 months.